In
2005, taxes owed with collection potential had grown to $132 billion.
That number may climb in 2006, with perhaps $150 billion owed by taxpayers
in default.

The
Internal Revenue Service has not pursued some tax debt due to limited
resources, manpower constraints and higher priorities. As a result,
the US Congress has authorized the IRS to contract with private collection
agencies (PCA) to help collect tax debts.

The
IRS developed a Private Debt Collection (PDC) program to start with
a limited implementation in September 2006 and fuller implementation
expected in January 2008.

Unfortunately,
according to the Center for American Progress, the structure of the
IRS program encourages abuse. Under the program, collectors are awarded
as much as 25 cents of every dollar they collect, in addition to a
$100 bonus for every account they close.

This
provides incentives for collectors to push the limits of legality
to extract a little more revenue from their targets. As part of the
IRS Restructuring and Reform Act of 1998, Congress, fearing overly
aggressive collection practices, explicitly prohibited the IRS from
compensating its own collectors based on the amount of money they
collect. If Congress believes that incentive-based pay will cause
official IRS collectors to cross the line, why would they think private
collectors would behave any differently?

Taken
together, IRS's actions were intended to ensure that the PCAs will
be able to do the job and work the range of cases assigned, IRS will
have the necessary resources and caseload ready, and taxpayer rights
and data will be protected.

As
a result, the IRS risks not providing complete information that decision
makers would find useful. Finishing work on the factors could help
achieve but cannot guarantee program success, which also depends,
in part, on how IRS addresses the factors and identifies and resolves
any problems in the limited implementation phase.

Although
IRS officials indicated that the purpose of the limited implementation
phase is to assure readiness for full implementation using up to 12
private collection agencies, the IRS has not yet documented how it
will identify and use the lessons learned to ensure that each critical
success factor is addressed before expanding the program starting
in January 2008.

Because
program success will be affected by how well IRS makes adjustments,
assessing the lessons learned in limited implementation is critical.
Also, IRS has not documented criteria that it will use to determine
whether the limited implementation performance warrants program expansion.

IRS
officials indicated that they are considering criteria that could
trigger a go/no go decision, such as the amount of taxes collected
and indications of PCAs abusing taxpayers or misusing taxpayer data.

The
Internal Revenue Service proposal of paying private debt collectors
a 25 percent commission to collect unpaid tax debt is meeting with
bipartisan resistance from Congress. They claim the proposal will
jeopardize the rights and privacy of American taxpayers. Several organizations
voiced their objections to the IRS proposal and have expressed their
strong support for this important consumer protection legislation
Rep. Chris Van Hollen introduced: Citizens for Tax Justice, Consumer
Federation of America, Consumers Union, National Consumer Law Center,
National Consumers League.

Paying
private debt collectors on a commission basis will be costly and will
threaten the rights and privacy of the American taxpayers. We must
ensure, as this resolution seeks to do, that federal tax collection
functions will not be handed over to private sector bounty hunters.

A
recent Center for American Progress report noted that "19% of all
complaints received by the Federal Trade Commission (FTC) in 2005
were related to debt collectors, up from 10.5% in 1999. The FTC received
more complaints about debt collection in 2005 than about any other
industry -- 66,627, a 560% increase over the last six years." The
report's writers claim this will likely occur with private agencies
working on behalf of the IRS.

IRS
officials say they will have a little more than a half year to identify
the lessons learned before incorporating them into the next contract
solicitation, which IRS intends to release in March 2007.

Related
to such decisions on expansion is IRS's planned comparative study
of using PCAs. That study is to compare using PCAs to investing IRS's
operating costs into having IRS staff work IRS's "next best" collection
cases. Under the documented study design, IRS would exclude the fees
paid to PCAs from the costs and subtract those fees from the tax debts
collected by PCAs.

While
such a study might produce useful information, it will not compare
the results of using PCAs with the results IRS could get if given
the same amount of resources, including the fees to be paid to PCAs,
to use in what IRS officials would judge to be the best way to meet
tax collection goals.

Adequately
designing and implementing the study is important to ensure policymakers
are aware of the true costs of contracting with PCAs and know whether
PCAs offer the best use of federal funds, while using the least abusive
and intrusive tactics to collect tax money owed.

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But
taxpayer advocate Nina Olsen says that collecting tax revenue is the
core job of the IRS, and it should continue to bear that responsibility
while protecting taxpayer rights. IRS employees cost only 3 cents
for every dollar they collect, making them many times more cost-effective
than private collectors.

Jim Kouri, CPP
is currently fifth vice-president of the National Association of Chiefs
of Police. He's former chief at a New York City housing project in Washington
Heights nicknamed "Crack City" by reporters covering the drug war in the
1980s. He's also served on the National Drug Task Force and trained police
and security officers throughout the country.

He writes for
many police and crime magazines including Chief of Police, Police Times,
The Narc Officer, Campus Law Enforcement Journal, and others. He's appeared
as on-air commentator for over 100 TV and radio news and talk shows including
Oprah, McLaughlin Report, CNN Headline News, MTV, Fox News, etc. His book
Assume The Position is available at Amazon.Com, Booksamillion.com, and
can be ordered at local bookstores.